New York City Real Estate Blog Archives for September 2011

The high-end luxury market is back. For the past 3 years, high-end real estate was something of a black sheep among an otherwise healthy real estate market in Manhattan, but no longer. After the recession sent high-end condo sales into a precipitous slide for 2 years, the market began to reassert itself last year, albeit slowly. Recently though, the luxury condo market is making up for lost time. According to a Wall Street Journal analysis of city property filings during the third quarter, sales of high-end apartments in Manhattan reached their highest level since mid-2008, the peak of the real-estate boom.

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As a result of the trendiness and subsequent building boom on the West Side of Manhattan, neighborhoods such as Chelsea, the Meatpacking District, Clinton, and Midtown West have more than their fair share of new construction and luxury development. At the same time, however, the Upper West Side is certainly gaining on its Hudson River-bounded neighbors to the south, in particular with Extell’s Riverside Center, the southernmost point of the Trump megaproject known as Riverside South, whose new construction will bring contemporary condominiums in New York City to a new level.

The New York City luxury condo market is generally recognized as its own real-estate niche. Certainly, national real-estate market forecasts have repercussions on NYC's real-estate beat--but they're limited. So don't write off the Manhattan luxury condo market to broadcasted waves of statistics just yet. Yes, according to The Wall Street Journal the national housing inventory crashed into rocky lows this year; but refocusing the real-estate market lens to apartments for sale in Manhattan, the city has seen units going up, and several buildings being re-launched after bitter 2010 presales, according to The New York Post. Manhattan is proving yet again to be the exception to the rule.

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Most people think that, in a nutshell, a broker is a broker is a broker. Buyers pay good money for the brokers that work for them because of their excellent knowledge of Condominiums and Co-ops in Manhattan, but that’s only half the story. Consumers often fail to realize that most brokers are seller’s brokers and as such their primary responsibility is to represent the seller’s interests. After all, the sellers pay their commission. Sometimes seller's brokers leave out important information about building problems, apartment defects or poor resale value, for instance, or negotiate unfavorable contract terms for the buyer. These practices aren't common but they are possible in these situations.

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The days of massive condos that were a staple of the boom period in New York City condo construction are over, at least for now. An extremely difficult loan market has forced developers to adjust their strategies and abandon earlier efforts to build condos with hundreds of units. The result is a sharp drop in size: according to data compiled by StreetEasy.com, new condo projects in 2005 and 2006 averaged 83 units per building, while so far in 2011 the average is 34 units. Additionally, StreetEasy.com reports that developers built 10 condos of 100 units and over in both 2005 and 2006, but this year there is only one such condo being built.

The crux of the problem is that the money just isn’t there. New York City’s overall real estate market may be healthy – at least in comparison to the rest of the country - but financing large projects is difficult at best. Extell Development Co. president Gary Barnett told the Wall Street Journal that, "It's extremely difficult to finance large condos. Rentals you can get done, you can get small projects done." The residential high rises that define many neighborhoods, such as Midtown Manhattan, have also tapered off severely for similar reasons. In the eyes of the banks the market demand for these kinds of buildings is simply not strong enough to justify their creation. Loans in the ranges of $25million – $75 million are now the norm, a far cry from loans of $500million+ needed to build larger projects.

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Some things are too good to be true, and some things merely seem that way. File the real estate market in Manhattan’s East Harlem in the latter category. For buyers in search of affordable New York City condos and co-ops, East Harlem offers new buildings that have incomparable prices when compared to the rest of Manhattan. The real estate market there didn’t recover much from the recession, and prices per square foot remain much cheaper than pre-recession levels. Combine this with continuous construction of new condos in East Harlem despite the changed economy and everything adds up to very good deals for buyers.

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The NYC luxury condominium market is renowned for its high-rises. With over 45 luxury high-rise condos sprinkled throughout the city, blue-boarded scenes of constructions hoping to scrape the sky is nothing unusual. Indeed, what is unusual is when Manhattan mega-condos aren’t rising. Because the NYC condominium market rides in waves of booms and falls, glass towers shoot up somewhat cyclically. In 2011, Manhattan condominium developers have decided to throw their dice in on residential boutiques and conversions.

According to theReal Deal’s published statistics of the New York State General Attorney’s office (whose stamp approves condo constructions and conversions) only 466 new condo units have risen in Manhattan in 2011. In 2006, there were 10,660 new NYC apartments for sale. But what accounts for the fewer luxury apartments going up is the shrinking pipeline of submissions to the AG, and developers’ shift to the smaller, scaled-back amenity boutiques and conversions that have a shorter turnaround time and smaller price tags. As New York City condominium developers are given tricky budgets, less risky downsized Manhattan residential buildings with immediate ribbon-cutting ceremonies are more likely to get financed. Current federal loaning hurdles often require condo buildings to have closed substantial presales before backing a homeowner’s mortgage--smaller boutiques in Manhattan districts like Tribeca and Chelsea with fewer apartments for sale can jump these hurdles easily.

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Next door neighbors are teaming up to sell their luxury apartments, illustrating NYC’s newest real estate trend: the higher demand for three-bedroom apartments and more. The “combination apartment”, in which owners sell their apartments together so the buyer can break down walls and created a “super-sized” unit, also provides for a higher profit for each individual luxury condominium or co-op owner. However, this is not simply a means to make apartments more marketable to buyers; it also falls in line with a general rule of thumb within NYC real estate, which states that unlike most other areas in the U.S., the larger the space, the more a seller can charge per square foot.

While there are a variety of factors influencing this trend, there are two main reasons for this increase in combination apartments within NYC real estate. A one bedroom that can be potentially transformed into a three bedroom often increases the buyer pool, especially if each individual unit is offered as separately as well. This falls in line with the growing desire of those searching for larger luxury apartments, especially as more and more Manhattanites choose to remain in NYC to raise their families. And even though demand has risen for “super-sized” apartments in recent years, new construction has been unable to match this desire with available supply.

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The stories were bleak. Families owing more than their homes were worth; foreclosure signs on lawns becoming a common sight. In response to the subprime mortgage crisis that busted the real estate bubble back in 2008, the government passed legislation to get the housing industry moving again--but some of that legislation is set to expire soon.

As always, New York City is positioned to be an exception, and the wrinkle of impending national policy affecting the size of government insured-loans will have a disproportionate impact on buyers looking at apartments for sale in Manhattan and in other high-cost metropolitan areas.

With the government-loan limit to be reduced by around $100,000 as of October 1st, hundreds of real-estate buyers from the suburbs and city will be forced to either come up with a larger down payment, or face the prospect of signing “jumbo” loans at the real estate table. An appraisal reported in New York Times reports that the new limit would affect about 7 percent of transactions in Manhattan.

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Nestled in the heart of Manhattan’s exciting Tribeca neighborhood, 250 West Street condos, originally a warehouse built in 1906, is now currently in the midst of a luxury condominium conversion. Developed by the Elad Group with the keen eye of architecture firm Gal Nauer, and planned to officially open in the first quarter of 2013, the luxury apartments in this 11 story, 111 unit building have been selling more quickly than they are being built. In fact, over 25% of the luxury condominiums within 250 West Street, though still unfinished, have already been sold, even with an array of other hot buildings in this historic New York City neighborhood. Drawing headlines and the gaze of many who keep tabs on the New York City real estate scene, we at New Construction Manhattan decided to investigate this up-and-coming Manhattan condominium.